We have investigated the mechanistic aspects of inactivation of the major larval cuticle protein genes (Lcp1-4) in Drosophila miranda during Y chromosome evolution. The Lcp genes are located on the X2 and neo-Y chromosomes in D. miranda but are autosomally inherited in all other Drosophila species investigated so far. In the neo-Y chromosome all four Lcp loci are embedded within a dense cluster of transposable elements. The X2 Lcp1-4 loci are expressed, while the Y chromosomal Lcp3 locus shows only reduced activity and the Lcp1, Lcp2, and Lcp4 are completely inactive. Our results suggest that Lcp1 and Lcp3 loci on the degenerating Y chromosome of D. miranda are silenced by neighboring transposable elements. These observations support our assumption that the first step in Y chromosome degeneration is the successive silencing of Y chromosomal loci caused by trapping and accumulation of transposons.